Podcast 356: Carlos Domingo of Securitize


The tokenization of digital assets is still in its infancy. There are some innovative companies that have created the technology to put a variety of assets onto the blockchain. But no one had done anything with venture capital and limited partners until SPiCE VC, the world’s first tokenized VC fund.

My next guest on the Fintech One-on-One Podcast is Carlos Domingo, the CEO and Founder of Securitize. Carlos and his co-founder spun out the technology for SPiCE VC and formed Securitize in 2017. Since then, the company has achieved a number of breakthroughs, not least of which was becoming the first SEC Registered Transfer Agent operating on the blockchain in 2019.

In this podcast you will learn:

  • Why Carlos decided to start a blockchain-based venture capital firm.
  • How he describes Securitize today.
  • His definition of tokenized assets.
  • The different asset classes they are focused on.
  • The advantages of managing cap tables on the blockchain.
  • How this process actually works.
  • How the tokenized assets are custodied.
  • How companies are included on their marketplace.
  • The types of investors that participate on their platform.
  • The variety of assets on their primary marketplace.
  • How the process works to make an investment.
  • The different ways Securitize makes money.
  • How many investors they have and the scale they are at.
  • Why companies choose to raise money on Securitize.
  • The different regulatory structures they use to raise money.
  • Thoughts on future institutional participation in the DeFi space.
  • Why large institutions like Morgan Stanley are investing in Securitize.
  • Carlos’ vision for the future of the capital markets.

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Download a PDF of the Transcription or Read it Below

FINTECH ONE-ON-ONE PODCAST 356-CARLOS DOMINGO

Welcome to the Fintech One-on-One Podcast, Episode No. 356. This is your host, Peter Renton, Chairman and Co-Founder of LendIt Fintech. 

(music) 

Before we get started, I want to talk about the 10th Annual LendIt Fintech USA event. We are so excited to be back in the financial capital of the world, New York City, in person, on May 25th and 26th. It feels like fintech is on fire right now with so much change happening and we’ll be distilling all that for you at New York’s biggest fintech event of the year. We have our best line-up of keynote speakers ever with leaders from many of the most successful fintechs and incumbent banks. This is shaping up to be our biggest event ever as sponsorship support is off the charts. You know, you need to be there so find out more and register at lendit.com

Peter Renton: Today on the show, I’m delighted to welcome Carlos Domingo, he is the CEO and Founder of Securitize. Now, Securitize is a super interesting company, they are really focused on tokenizing assets, putting them on to the blockchain. If you don’t really know what I’m talking about there, you’re in luck because we go into great depth about exactly what that means in the type of assets they are tokenizing and we talk about how they built their market. They’ve got a primary market and a secondary market, the scale they’re at, as I said, how the mechanics work and why companies should raise capital this way. We also talk about DeFi, about some of the traditional investment banks that’s on their cap table. Carlos also gives his vision for the future of capital raising. It was a fascinating conversation, hope you enjoy the show.

Welcome to the podcast, Carlos!

Carlos Domingo: Hi, Peter, thanks for the invite.

Peter: My pleasure. So, why don’t you get started by giving the listeners a little bit of background about yourself. I’d love to kind of hear some of the career highlights to date.

Carlos: Okay. So, I’m originally from Spain, from Barcelona, studying computer science there, moved to Japan very early on, that was like the first experience abroad. I did my Master and PhD at university called Tokyo Institute of Technology which is kind of like the MIT in Japan and then started my professional career there with the dot com times, started with a company that went public in what was NASDAQ in Japan at that time which basically opened during the dot com time. When the company went public, we acquired eventually three companies in the US so I moved to manage one of the companies first and that was my experience living here on the West Coast and eventually managed all the operations for this public utility company outside the US.

We were doing software for creative professionals basically and then when the downturn came, obviously, you know, everything, as you might remember, was in very bad shape. You know, NASDAQ Japan actually closed so we ended up being delisted and there was a lot of drama around so kind of worked in turning around the situation for a while. And then in 2006, you know, I was recruited by a telecommunications company called Telefonica so I moved back to my home country for the first time to work, you know, worked there for eight years basically focused on the non-connectivity side of the business, what was called digital at that time for telcos that provide services beyond connectivity and it was like, you know, the year before the iPhone came out which transformed the industry in a big way. You know, Telefonica was particularly active there and after eight years, well, all telcos suffered the same problem of not actually being able to monetize beyond, let’s say, their basic connectivity services that they were providing.

So, I then left Telefonica, moved to another telco in the Middle East, in Dubai, and then set up their digital operations for a period of time. At some point, I just got bored of telecommunications, there’s not much happening so I was looking for other things to do and fintech was something I was particularly interested in because of my background with, you know, software and product as well as regulated entities and then I kind of stumbled upon blockchain in 2016 when Ethereum launched. So, my friends started, you know, issuing documents on Ethereum with some of their early ICOs and I got fascinated about the space and about the possibilities and said to them, I will work fulltime into blockchain and here am I today.

Peter: Alright, But, at the same time, I know that you started a venture capital firm and so maybe before we talk about Securitize, I’d love to get your sense about why start a venture capital firm today and what kind of…where venture capital is at, what you saw as something that was missing.

Carlos: So, at that time, this is when the whole ICO space was booming in 2016, you know, I had a friend that was trying to raise a venture capital firm and that was the first VC that he was trying to do, I mean, because the whole token space started and people were raising money with tokens on the Internet using blockchain, I kind of suggested, why don’t we do an ICO for this fund and then started exploring that option. The whole idea was well, you can then give access to venture capital to any investor potentially with venture capital, as you know, is primarily the realm of institutional investors and the second thing is venture capital has one problem which is as an asset class it is extremely illiquid, right, it has gotten worse over the years for companies tend to go public much later than they used to.

So, my idea was we do a token for the fund and making them provide liquidity for this token that represents their interest and then what happened is they will realize well, we cannot do this in the way ICOs were being conducted, back then because obviously a token that represents the interest of the fund is a security and, you know, we were early on one of the first teams in the space that kind of recognized these tokens are probably securities.

Rather than try to bypass regulations or pay regulatory arbitrage which a lot of people did back then and still doing in the crypto space, we then decided to conduct what was one of the first security token of where basically you show tokens that represent security, in this case it will be in the interest of the fund and the whole idea was that we can provide liquidity to it obviously for this to be a reality, but eventually ended up happening in the space, it’s trading in two different regulated marketplaces and it’s a very different kind of VC in that respect.

Peter: Okay. And so, I want to go to Securitize, how do you describe Securitize today?

Carlos: Securitize is basically a company that focuses on the digital asset securities space so we basically help companies to basically tokenize real world assets which is the majority of the instances these art projects as securities. We have a number of SEC licenses that allow us to basically issue tokens that represent securities manage those tokens and the compliance, conduct asset servicing and then help them both, you know, sell tokens to the investors through a broker/dealer as well providing liquidity for the secondary marketplace that we have. So, we have an end-to-end life cycle for tokenized assets on the blockchain.

Peter: So, when you say tokenized assets, can you give the average lay person a description of exactly what you mean there.

Carlos: Yes. So, we focus on private capital markets, public markets have a different set of problems, but in private capital markets, you know, typically securities are not properly digitized or they’re not digitized at all. That creates also a problem, right, from tracking cap tables, to be able to prove ownership of a…



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